Republican Gov. Ron DeSantis terminated Disney’s special tax status in Florida, signing legislation on Friday that effectively punishes the entertainment giant for its opposition to the state’s “Don’t Say Gay” law.
The measure, which passed swiftly through the state’s GOP-led House and Senate this week, strips Disney of protections that have allowed the company’s theme park to self-govern for nearly six decades within a special Orlando-area taxing district.
DeSantis’s move is a financial and operational blow to Disney, since its theme park and resort have benefited from limited red tape and certain tax exemptions.
Why is Gov. DeSantis targeting Disney?
Disney chief executive, Bob Chapek angered Republican lawmakers when he said at a shareholder meeting on March 9 that he had called DeSantis to “express our disappointment and concern that if legislation becomes law, it could be used to unfairly target gay lesbian, nonbinary and transgender kids and families.” Chapek also said Disney would review the political contributions it makes to Republican lawmakers who supported the bill.
Many other critics have labeled the so-called Don’t Say Gay law as discriminatory, as it bans teaching sexual orientation and gender identity in primary schools. It was signed into law in late March.
The new law highlights the collision of two national trends: A deeper involvement of companies in social-political discourse and a growing eagerness among lawmakers to strike blows against corporations with legislative measures. As more socially-conscious younger generations demand higher levels of corporate responsibility, employers like Disney are forced to balance their needs with the conservative views of some Republican lawmakers. Last year, after Texas enacted a law banning abortions after six weeks of pregnancy, Citigroup offered to cover the travel expenses of employees traveling out of state for abortions. One lawmaker in the state threatened to introduce legislation that would prevent the bank from underwriting municipal bonds in the state.
Here’s what to know about the new law and what it means for Disney:
What does the legislation do to Disney?
The law dissolves Disney’s special taxing district in June 2023. Known as the Reedy Creek Improvement District, the 40-square-mile zone allowed the company to run its resort like a municipal government.
The status helped Disney circumvent some state and county regulations when constructing, expanding, or improving its parks, and allowed it to run its own emergency services in the district. The company was also exempt from many taxes and fees, which saved it tens of millions of dollars a year. It’s unclear exactly how much Florida’s move will cost Disney.
Disney’s loss will also have an impact on local taxpayers. Disney contributed the bulk of the $153 million in tax revenue and fees collected in the district over the last fiscal year. Now, Reedy Creek’s governance becomes the responsibility of nearby Orange and Osceola counties, and taxpayers there may now get saddled with millions of dollars in bond debt taken on by Reedy Creek in recent years. Democratic state lawmakers say the interest on those bonds equates to an additional tax burden of $580 per person for the 1.7 million residents of the counties.
How has Disney responded?
Disney’s revenue growth is at stake with the possible loss of special tax district status, as the company will not only lose autonomy but its expenses are likely to increase. Following a pandemic-induced dent in sales, Disney’s theme parks have been enjoying a boom. As lockdown restrictions eased, attendance at the company’s parks grew throughout 2021. A hike in ticket prices sent revenue for the final quarter of last year up to $7.2 billion, compared to $3.6 billion in the same period of 2020. The increase helped the parks attendance generate a third of Disney’s $22 billion in quarterly revenue.
What happens next?
DeSantis’s salvo could have national implications, possibly emboldening lawmakers in other states to strike out against major corporations whose leaders disagree with their policies.
For Disney, the Reedy Creek district’s imminent dissolution, could mean that it will apply to reestablish its status, but at the time of writing, Disney has not yet addressed the issue publicly.
The company did not respond to TIME’s request for comment.
The new law is a big win for Gov. DeSantis as he continues to stoke culture war issues ahead of a potential 2024 presidential run. “If Disney wants to pick a fight, they chose the wrong guy,” DeSantis wrote in a recent campaign fundraising email.
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